fisher - how to smell a rat; the five signs of financial fraud (2009)

[...]... all—all—had one major thing in common: They all had access to the till They made sure of that A rat has to have access to the cheese Take away the access, and they probably do no more damage than a Three-Card Monte street hustler And if you don’t give them that access—refuse to hand over decision making—then you are safe 20 h ow to s m e l l a rat What Victims Look Like Or are you? This book teaches how. .. But after a bear market knocks their stocks down, those same, confident, tough-guy (or gal) investors may change Not only do they now want capital preservation, but they often believe that’s all they ever wanted! Growth? Who ever wanted growth? Not them! Same investor— and they’ll swear they haven’t changed Their long-term goals certainly haven’t But what they say they want has The bull market made them... finally admitted to Grant they were in financial trouble, and Grant, believing in Ward, asked for a $150,000 loan from railroad king and friend William Vanderbilt Vanderbilt gladly lent the money, but soon that too was gone And then Ward disappeared Grant tried to pay off the loan to Vanderbilt by giving him his home, his horse farm, and all his belongings Vanderbilt refused to accept Grant was already... but the bear market made them daunted And that’s when a con artist strikes The Big Swindle So how can you rat out the rat? By knowing how they operate No matter what the window dressing, no matter the psychological ploys, the rat’s fundamental operation is the same They sell themselves as chief decision maker Then they have clients deposit assets in a custodial institution they control or in an account... daunted, like Dave So too were Kirk Wright’s sports stars Classic daunted investors They don’t have time Plus, big-time stars and athletes can be very isolated Movie stars in particular are sheltered from the real world and most of their financial decisions are made by their managers They feel isolated and unable to deal with the real world because the real world makes such a fuss over them Often, they’re... the recent cases and history’s biggest cases, and they all have one thing in common—financial fraud sign number one: The money manager also had custody of the assets In other words, the money manager or financial adviser also acts as the bank or broker/dealer—holding and supposedly safekeeping the assets he/she/it manages Clients didn’t deposit the money with a third party—they deposited the money directly... framework to deceive Always better to be suspicious and safe than trusting and sorry Remember, Madoff and Stanford (allegedly) ran their scams for years—Madoff for possibly two decades! Folks looked into their eyes and trusted them 6 h ow to s m e l l a rat Big or Small a Con Wants ’em All Madoff stole billions Stanford’s alleged to have done the same Even some relatively “smaller” cons stole many millions... some con wants you They need constant incoming funds to support the pyramid—wherever they can get them And as the scam wears on and they get desperate, they may increasingly turn to smaller investors—any investors to keep money flowing in And that’s when you can get really hurt They have no hesitation at all to take all your money and leave you penniless, knowing full well what they’re doing and how it... one and nothing else—and market volatility uncovered it A fraudster is never an indictment of any era—he’s just an indictment of his own soulless black heart He’s a rat We’ve always had human rats These are bad criminals and must be thought of as solely criminals to be put in a rat cage and not let out They are stylistically different, but otherwise no different from criminals that engage in larceny,... never a smooth ride Bull markets 10 h ow to s m e l l a rat feel wonderful and bear markets nauseating But over time, stocks have been a great long-term investment vehicle for investors who have had the stomach to ride it out Ironically, this is exactly opposite to what Madoff, Stanford, and hundreds of other scamming villains have claimed over the years Many of their victims were fooled by claims of . investors. The Press covers a range of investing and market-related topics for a wide audience—from novices to enthusiasts to professionals. Books by Ken Fisher How to Smell a Rat The Ten Roads. information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Fisher, Kenneth L. How to smell a rat : the fi ve signs of fi nancial fraud. did most of the grunt - work heavy lift- ing, and I got to have most of the fun. So I really do have to acknowl- edge Lara for over - the - top contributions to making this book a reality. She